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Landlords Beware - DRO Day: 9 April 2009

13-03-2009, 11:31 AM

New legislation comes into force on 9 April 2009, which is not getting much publicity, and could adversely affect landlords.

Debt Relief Ordersare a cheap form of bankruptcy, which only costs £90. The debtor should have less than £15,000 in debts and no more than £300 in assets (but can have more 'outside' the home, e.g. a car valued at up to £1,000). Also, 'household' items, not personally owned (such as the latest plasma screen tv and hi-fi system) needn't be included as assets if they are 'family' purchases.

All debt enforcement has to stop once the order is lodged, and after a year the debts get written off. The debtor can't have any credit at all then for six years. Any creditor can object if, for example, they think that the information supplied by the debtor is false. However, it will be evidence based, and the creditor will need to provide proof of the difference.

All the debtor does is fill out a form listing their debts and assets, signs a declaration of truth and sends in their £90. If they haven't got £90 in one go, they can pay by instalments and although the procedure has not been published yet, I have been told that the DRO still gets lodged when paying by instalments, but the debts will not be written off after the year if the full payment has not been made.

One of my contacts say that Citizens Advice have 40,000 claims that are waiting for this to become law.

I have been told that rent arrears and damages can be included in the debt schedule.

The scheme is meant to be run at no cost to public funds and all DRO's have to be lodged via an a single appointed intermediary 'competent authority' The Insolvency Service have surprisingly appointed Bains and Ernst as the sole intermediary to the astonishment, as I hear on the grapevine, of the Office of Fair Trading. It appears that the OFT are surprised due to regular complaints from consumers who have got involved in debt management plans with this firm and allege that they have been given wrong advice or have faced excessive charges.

On some things I am very knowledgeable, on other things I am stupid. Trouble is, sometimes I discover that the former is the latter or vice versa, and I don't know this until later - maybe even much later. Because of the number of posts I have done, I am now a Senior Member. However, read anything I write with the above in mind.

Comment

First, on a pragmatic level, how successful is court action in enforcing judgements against tenants who owe a few thousand pounds? If they have the money, the chances are they will have paid it; most ccjs are against the impecunious. So it could be argued that it is academic whether they make themselves bankrupt or not since the LL is unlikely to see the money either way.

Second, to make oneself bankrupt, even if it only costs £90, is not exactly a 'get out of jail free' card, (although some will inevitably see it as such). Those who exercise this option would have to be extremely dim or desperate, since they will not be allowed any credit of any kind for years and they will certainly struggle to secure any other accommodation after you throw them out - nobody is going to let a property to a bankrupt, are they?

I think, from a LLs point of view, the only answer is absolute rigour in referencing Ts before signing them up and ensuring a referenced guarantor is in place for all no/low income Ts.

'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'.Charles Dickens, Great Expectations

Comment

Maybe people have been made redundant & fallen on hard times maybe ill health,divorce etc... has caused them to take this route

Who do you think rents properties ?
Hmm lets see mostly peolpe who can't afford to buy or have no deposit to buy one ! for whatever reason

If someone is bankrupt they are not servicing debt so have more disposable income to pay for example rent

Who are you to judge that a bankrupt is not worthy of a roof over their head

Excuse me, but please don't jump to conclusions. I pass no judgement as to the moral standing (or otherwise) of people who declare themselves bankrupt. My statement about their difficulty in obtaining private rented accommodation was based simply on the fact that one of the first conditions required by a tenant referencing check is that there shoudl be no unspent ccjs or bankruptcy orders against a prospective tenant's name.

I appreciate that there are various reasons why people may be desperate enough to take this route, but clearly it is not a quick fix; it has consequences, one of which is extreme difficulty in finding decent rented accommodation. That is all I said.

'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'.Charles Dickens, Great Expectations

Comment

We shall have to agree to disagree on that one
I help to advise people in such positions
Many people go onto rent good properties at high rents
If they are honest with the letting agents & landlords from the start many accept them
The asking of additional deposit or 3 - 6 months rent in advance is common and in my view discrimination

If someone is bankrupt they are not servicing debt so have more disposable income to pay for example rent

Possibly, possibly not. It depends why they declared themselves bankrupt in the first place. In some cases; please note I have not said 'all') it will have been because they cannot manage their personal finances - addiction to spending money for whatever reason may mean that money just evaporates and they do not have enough for the essentials.

Who are you to judge that a bankrupt is not worthy of a roof over their head

I have not said that and I would be interested to know why you think I have.

'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'.Charles Dickens, Great Expectations

Comment

Mind The Gap I stand by every word I posted not just the ones I select to quote later
I do not wish to fall out with someone who has previously offered me help here
The original post in my personal opinion was poorly phrased
I shall not get into a tit for tat over it I obviously have strong views on this matter and do not wish to force them on others
I withdraw

Starlettings so you wouldn't have rented to any of these people then ?

The commonest causes of bankruptcy are sudden ill health ,redundancy,divorce
All traumatic events where you often have little or no control,Irresponsible,sensational reporting does not help

Irresponsible lending by banks & credit card companies & financial ignorance are also a factor but do not represent the majority

What about all those buy to let landlords who are in negative equity and can't renew on mortgages ?

My client does pay into a 3 year IPA & his creditors will receive alot of there money back over this period
Ignorance of the mechanics of bankruptcy is also a problem people make assumptions that are not based in fact

Comment

Borat thinks both sides have valid points. Borat has worked woth both sides and realises that there are valid points made by both but he cannot understand why everything has to be generalised and put one group of people into one box..... Borat is proud he personally does not fit into any box.

Borat thinks that everyone that goes bankrupt cannot pay their debts or the bankruptcy would not happen. Borat also believes that people do have to take some responsibility for their own actions.

Borat hope his post are some help. Borat thinks people should double check anything someone who refers to himself in third person says...

Comment

P.S If Borat had a house to rent out he would try avoid renting to Mike Tyson because he likes his ears. Also he would be nervous attempting to collect arrears coz Mike appears to have anger issues.....

Borat hope his post are some help. Borat thinks people should double check anything someone who refers to himself in third person says...

It is for the tenant to surrender their lease, and then for the landlord to accept (or not). A s21 notice by itself, and for that matter a tenant leaving as a result of the notice is probably not sufficient to meet the standard required for surrender by operation of law.

This is a bit of an unusual situation and I'm not sure what to do... long story short, my tenant stopped paying their rent in June and has given me several reasons why they couldn't pay. I tried my best to be accommodating, as I thought it's best to do that and try to come to an amicable arrangement...

I've heard that one before.
It's always mistaken.
Any tenant would take care the property they rent, in fact they have to (the property has to be returned in the condition it was given less fair wear and tear otherwise the landlord can claim compensation - regardless of who the tenant is)....

In English law, the principle is, essentially, that the law is what it says, not what was meant.
When you read appeals cases, the amount of time spent looking at definitions and trying to match the precise wording to the precise situation is testament to this.